Consider
Other Mortgage Programs
If
you are thinking about refinancing your mortgage, you might
want to consider other types of mortgages. For example, you
might want to look into a 15-year, fixed-rate mortgage. In this
plan, your mortgage payments are somewhat higher than a longer-term
loan, but you pay substantially less interest over the life
of the loan and build equity more quickly. (Of course, this
also means you have less interest to deduct on your income tax
return.)
You
also might want to consider refinancing if you have an adjustable
rate mortgage with high or no limits on interest rate increases.
You might want to switch to a fixed-rate mortgage or to an adjustable
rate mortgage that limits changes in the rate at each adjustment
date as well as over the life of the loan.
If
you decide to apply for refinancing with a particular mortgage
company, and if you do not want to let the interest rate "float"
until closing, get a written statement to guarantee the interest
rate and the number of discount points that you will pay at
closing. This binding commitment or "lock-in" ensures that the
mortgage company will not raise these costs even if rates increase
before you settle on the new loan. You also may consider requesting
an agreement where the interest rate can decrease but not increase
before closing. If you cannot get the mortgage company to put
this information in writing, you may wish to choose one that
will provide this important information.
Most
companies place a limit on the length of time (say, 60 days)
they will guarantee the interest rate. You must sign the loan
during that time or lose the benefit of that particular rate.
Because many people refinance their mortgages when rates decline,
there may be a delay in processing the papers. Therefore, you
may want to contact the company periodically to check on the
progress of your loan approval and to see if additional information
is needed.
